Exhibit 4.2
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “1933 ACT”). THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AND
APPLICABLE STATE SECURITIES LAW.
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Warrant to Purchase Common Stock
of
Chapeau, Inc.
Void after March 21, 2013
This
Warrant is issued to TEFCO, LLC, a Virginia limited
liability company (the
“Holder”), by Chapeau, Inc., a Utah corporation
(the “Company”), as of March 21, 2008 (the
“Warrant Issue Date”). This Warrant is
issued pursuant to that certain Turnkey Financing, Loan and
Security Agreement dated as of March 20, 2008 (the
“Agreement”).
1.
Shares.
Subject to the terms and conditions of this Warrant,
the Holder is entitled, upon surrender of this Warrant at the
principal office of the Company (or at such other place as the
Company shall notify the Holder in writing), to purchase from the
Company Five Million (5,000,000) fully paid and non-assessable
shares of Common Stock, as constituted on the Warrant Issue Date.
The number of shares of Common Stock issuable pursuant to this
Section 1 (the “Shares”) shall be subject to adjustment
pursuant to Section 10 below.
2.
Exercise
Price . The per share purchase price for the Shares shall be
equal to $1.99, which is 150% of the average closing price per
share of Common Stock on the over-the-counter bulletin board during
the 30 days prior to December 14, 2007 as adjusted from time to
time pursuant to Section 10 below (the “Exercise
Price”).
3.
Exercise
Period. This Warrant shall be exercisable, in
whole or in part, during the term commencing on the Warrant Issue
Date and ending at 5:00 p.m. Eastern on the five (5) year
anniversary of the Warrant Issue Date; provided that in the event
(each a “Disposition Event”) of (i) the closing of the
Company’s sale or transfer of all or substantially all of its
assets, or (ii) the closing of the acquisition of the Company by
another entity by means of merger, consolidation or other
transaction or series of related transactions, resulting in the
exchange of the outstanding shares of the Common Stock (unless (A)
the shareholders of the Company immediately prior to such
transaction or series of related transactions are holders of a
majority of the voting equity securities of the surviving or
acquiring corporation immediately thereafter, and (B) each of such
shareholders immediately prior to such transaction or series of
related transactions holds the same pro rata share of such majority
of the voting equity securities of the surviving or acquiring
corporation as each hold of the Company immediately prior to such
transaction or series of related transactions), this Warrant shall,
on the date of a Disposition Event, no longer be exercisable and
become null and void. The Company shall notify the Holder at least
30 days prior to the consummation of any Disposition Event and, in
all circumstances, the Holder shall have at least 20 days prior to
the consummation of such Disposition Event to exercise this
Warrant. The Company shall notify Holder thirty (30) days prior to
expiration of Warrant. Failure to do so shall extend the
Warrant thirty (30) days from the receipt by Holder of such
expiration notice.
4.
Method of
Exercise. While this Warrant remains outstanding
and exercisable, the Holder may exercise this Warrant, in whole or
in part, at one time or from time to time, by:
(a) the
surrender of this Warrant, together with a duly executed copy of
the form of Notice of Election attached hereto, to the Secretary of
the Company at its principal offices; and
(b) the
payment to the Company of an amount equal to the aggregate Exercise
Price for the number of Shares being purchased.
(c) In lieu
of exercising this Warrant by paying the Exercise Price in cash,
the Holder may elect to receive shares equal to the value of this
Holder (or the portion thereof being exercised) by surrender of
this Holder at the principal office of the Company together with
the Notice of Cashless Exercise annexed hereto as Schedule B
duly completed and executed, in which event the Company shall issue
to Holder the number of shares of Common Stock computed using the
following formula:
X=
(Y)(A-B)
A
Where
X = The number of shares of Common Stock to
be issued to Holder.
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Y
=
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The
number of shares of Common Stock purchasable under this
Warrant.
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A
=
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The
fair market value of one share of Common Stock.
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B
=
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The
Exercise Price (as adjusted to the date of such
calculations).
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(d) For
purposes of this Section, the fair market value of one share of
Common Stock shall be equal to the volume weighted average closing
price per share of Common Stock on the over-the-counter bulletin
board (or such other securities exchange or Nasdaq market on which
the Company’s securities are trading) over the 30 days prior
to exercise, or, if the Company’s Common Stock is not trading
on the over-the-counter bulletin board (or such other securities
exchange or Nasdaq market) the fair market value shall be
determined by the Board of Directors in good faith.
In
the event of a partial exercise of this Warrant, the Company
shall cause to be issued to the Holder a Warrant of like tenor
to this Warrant for the number of Shares for which this
Warrant has not yet been exercised.
5.
Representations
and Warranties of Holder. The Holder hereby
represents and warrants that:
(a) This
Warrant and the Shares to be received upon exercise of this Warrant
(collectively, the “Securities”) are being acquired for
investment for the Holder’s own account, not as a nominee or
agent, and not with a view to the resale or distribution of any
part thereof, and the Holder has no present intention of selling,
granting any participation in, or otherwise distributing the
Securities, in whole or in part. The Holder does not
have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or
to any third person, with respect to the Securities.
(b) The
Holder is able to fend for itself, can bear the economic risk of
its investment, has adequate means for providing for its current
needs and contingencies and has no need for liquidity with respect
to its investment in the Company, and has such knowledge and
experience in financial or business matters such that it is capable
of evaluating the merits and risks of the investment in the
Securities.
(c) The
Holder is an “accredited investor” as that term is
defined in Rule 501 of Regulation D.
(d) At no
time was the Holder presented with or solicited by any publicly
issued or circulated newspaper, mail, radio, television or other
form of general advertising or solicitation in connection with the
issuance of this Warrant.
(e) The
Holder has received or has had full access to all the information
it considers necessary or appropriate to make an informed
investment decision with respect to the Securities. The Holder
further has had an opportunity to ask questions of and receive
answers from the Company regarding the terms and conditions of the
issuance of the Securities and to obtain additional information (to
the extent the Company possessed such information or could acquire
it without unreasonab
